Obama, Not His Party, Is Roadblock to Reg Relief: GOP

WASHINGTON — One of President Obama's biggest applause lines during his final State of the Union address to Congress was when he called for doing away with unnecessary and burdensome regulations.

"There are outdated regulations that need to be changed, and there's red tape that needs to be cut," Obama said, receiving a standing ovation from both Democrats and Republicans.

After the speech late Tuesday, some Republican lawmakers pointed to that moment as an area of a bipartisan agreement where they hope they can make strides in 2016.

"You saw the support in the chamber — Republicans and Democrats — and the president is admitting that the regulatory burden is onerous," Sen. Ron Johnson, R-Wis., said after the speech. "Every member is getting feedback from people in their districts and their state. The regulations in this administration are crushing them, so I will concentrate on those and do everything I can to move regulatory reform back."

But not everyone was so optimistic. Rep. French Hill, R-Ark., agreed he would like to see regulatory relief but said he has his doubts that anything significant will get done this year.

"I don't think we get meaningful regulatory relief under this president," Hill said.

He said the president's line about "cutting the red tape" might be all talk.

"[Obama says] we should lower regulatory burden yet he has created the largest regulatory burden by the proposals he has made," Hill said, noting that regulatory burden extends beyond banking and finance to industries such as health care and energy.

Still, Rep. Randy Neugebauer, R-Texas, said there is significant "bipartisan support — and not just in the financial services area but in other areas of regulation of cutting some of this red tape."

Lawmakers "recognize that we didn't necessarily get it right the first time and in particular with Dodd-Frank and the unintended consequences are one of the biggest inhibitors of the economy growing," said Neugebauer, the chairman of the House financial institutions subcommittee.

He noted that there have been several regulatory relief bills in the House that have bipartisan support — but said Obama has been the stumbling block.

"We have been trying to reach across the aisle on a number of issues," Neugebauer said. "We do not get any help from the president in moving those initiatives forward."

Neugebauer also said the glut of financial regulations is disproportionately hurting small institutions.

"What we are seeing is the biggest banks have gotten bigger and the small banks have gone away and that is a trend that we think long term is not good for our economy because in many cases our community banks our smaller financial institutions provide the majority of small business loans in this country," he said.

Hill also said that while the administration has posed a roadblock to important regulatory relief measures, that won't stop lawmakers from teeing up important issues for the next president.

"You will see us tackle mortgage finance again and look at Fannie and Freddie and evaluate what is next," Hill said. "This administration since the crisis has made no concrete proposal to reform Fannie Mae and Freddie Mac, so I hope this year we can at least set the stage for the next president on getting reforms in the secondary mortgage market."

Hill also said he expects more hearings on anti-money-laundering and terrorist financing. "I think you will see constructive proposals from the House Financial Services Committee that will modernize some of the things around anti-money-laundering and Bank Secrecy Act rules that will enhance terrorism finance interdiction."

During his speech, Obama said the U.S. has already been stepping up its efforts to stop terrorist financing noting that "for more than a year, America has led a coalition of more than 60 countries to cut off ISIL's financing, disrupt their plots, stop the flow of terrorist fighters, and stamp out their vicious ideology."

But complying with BSA/AML requirements has been challenging for banks who say complying can be expensive with little upside.

One proposal that the Treasury Department is in the process of finalizing would require banks to obtain beneficial ownership information on new business accounts to prevent terrorists and criminals from creating shell companies to launder money.

Hill identified the rule as an area where perhaps changes can be made to alleviate some of the burden on banks.

"In my view, Treasury has identified moderating beneficial ownership as a classic way to capture illegal activity — terrorist activity or drug activity — through the formation of shell companies and they have proposed that banks try and collect that beneficial ownership data through a very time-consuming and expensive regulatory process," Hill said. "In my view, the more elegant way to try and tackle that would be too look for areas to use the data the IRS already collects."

Obama also used the State of the Union as an opportunity to address criticism from Donald Trump and Sen. Ted Cruz, the front-runners in the Republican presidential contest that U.S. is in economic decline.

"The United States of America, right now, has the strongest, most durable economy in the world," Obama said. "Anyone claiming that America's economy is in decline is peddling fiction."

He also sharply criticized Trump's call to ban Muslims from the country.

"When politicians insult Muslims, when a mosque is vandalized, or a kid bullied, that doesn't make us safer," Obama said. "That's not telling it like it is. It's just wrong. It diminishes us in the eyes of the world. It makes it harder to achieve our goals. And it betrays who we are as a country."